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Acquisition reforms would give auditors upper hand

Infotech & the law | Legal insights for today's market

By Richard Rector

Jun 22, 2007

Richard Rector

As we approach this year'smidpoint, a number of contractingreforms are taking shape. Aftermonths of stops and starts, it appearsthat a handful of "accountability incontracting" measures will be headingto conference as part of the DefenseAuthorization Act for fiscal 2008.

Some of the reforms would have asignificant effect on the day-to-daybusiness of federal contracting.Although included in a DefenseDepartment bill, the reforms wouldapply to contracts at both Defenseand civilian agencies.

Many of the key reforms are in theHouse version of the Defense AuthorizationAct (H.R. 1585). Most of themare lifted verbatim from the muchbroader Accountability in Contractingbill (H.R. 1362), which the Housepassed in March on a 397-27 vote.

The Senate has not yet voted on itsversion of a Defense Authorization bill,which is likely to contain similar reformprovisions in several areas. Thus, it isnot clear that the House reforms willprevail in conference and become law.But they stand a good chance. TheHouse appears to have cherry-pickedthe provisions of the Accountability inContracting bill that enjoy the broadestsupport, and there is conceptual supportwithin the Senate Armed ServicesCommittee (see S. 1547) for several ofthe House reforms.

If passed, the five reforms in H.R.1585 that would be significant for thecontracting community are:

Definition of Commercial Services. Thisprovision would require a revision ofthe Federal Acquisition Regulation tochange the definition of commercialservices. The change would eliminatethe words "of a type" from the definition,thereby narrowing the kinds ofservices that could be purchased on acommercial-item basis. Notably, thechange could require contractors toprovide cost information in connectionwith the sale of commercial services.It likely would mean the withdrawalof certain service contractorsfrom the federal market.

Cost or Pricing Data for Commercial ItemsAcquired on Sole-Source Basis. This provisionwould take another step awayfrom commercial acquisition methods.It would require the submissionof cost or pricing data for commercialitems procured using noncompetitiveprocedures, if the agency believes suchdata is necessary and the contractorhas previously submitted such data onanother contract.

Disclosure of Audit Findings. This provisionwould require agencies to provideCongress on a quarterly basis with alist of completed audits that describecontractor costs in excess of $10 millionthat have been identified as"unjustified, unsupported, questionedor unreasonable," and material deficiencies in a contractor's performanceor business system. Agencies wouldgive the liststo five congressionalcommittees,which couldthen requestthat a full, unredacted copy of anyaudit be provided within 14 days.

Limitation on Length of "Urgent andCompelling" Contracts. This provisionwould limit the period of performancefor contracts valued at more than$1 million if the contracts wereawarded without competition due to"urgent and compelling" circumstances.In general, such contractswould be limited to not more thanone year in duration, unless such alimitation would seriously injure thegovernment's interests.

Public Disclosure of Basis for NoncompetitiveContracts. This provisionwould require an agency to make publiclyavailable, within 14 days of award,the justification and approval documentsthat provide the basis for a noncompetitivecontract. Although currentlaw makes such documents publiclyavailable, the change would requirethat they be available on the Web siteof the agency and through the FederalProcurement Data System.

Trade organizations have objectedto the first three of the reformsbecause they represent a dramaticstep backward from commercial-itemcontracting and a return to the dayswhen auditors were king.

Richard Rector is chairman of the governmentcontracts practice at DLA Piper US LLPin Washington. He can be reached atrichard.rector@dlapiper.com.

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